Blogs from July, 2018

If you have a trust in place, a pour over will is a necessary part of your estate plan. A pour over will directs that assets outside of your trust that are part of your estate should “pour over” into your trust when you die. A pour over will leaves the balance of a person’s estate to their trust and is a standard part of trust planning. Ideally, there should be no need for the will at death when a trust plan is in place because all of a person’s property should pass through their trust or by other contractual means. In fact, the point of many trust plans is to avoid transfers by will. However, if assets are forgotten or have not been made part of the trust during a person’s lifetime, a probate proceeding could be triggered unexpectedly due to that trust funding problem (or for other reasons). In the case that a probate proceeding is triggered, this type of will “pours” the assets that are outside of the trust into the trust.

Situations that could inadvertently lead to a probate include:

• Failure to re-title bank accounts and securities to the trust.
• Failure to re-title real estate to the trust.
• Creating new financial accounts after the trust is established in an individual capacity instead of as trustee.
• Purchasing new real estate after the trust is established and taking title in an individual capacity instead of as trustee.
• Forgetting to retitle real estate to the trustees after conducting a refinancing transaction.
• Funds becoming payable individually to a person with a revocable trust, such as an inheritance, but the person does not collect the funds before death.
• Property that cannot be held in trust or is intentionally not held in trust does not have proper beneficiary designations.

Since the pour over will is a safety-net in the event that there is a problem with trust funding, for example, the majority of legal language concerning a person’s assets who has a trust in place is contained in the trust instead of this type of will (the pour over will). The pour over will should be consistent with the trust it references and may go as far as stating that the specific terms of the trust apply even in an instance where the trust is no longer in force or in the event that the pour over will has to be probated.

This type of will typically names the same person who was designated as trustee of the trust as the executor of the pour over will while additionally mirroring the people named as alternates in the trust as alternate executors of the will as well (although common, this is not required). The reason this is common is because if the trustee of the trust is also the person named as the executor of the pour over will and the pour over will has to be used (in probate for example), then the same person will be the trustee of the trust and the executor of the will and will most easily and efficiently be able to distribute funds and assets to the revocable trust at the end of probate administration.

The pour over will is an important and necessary part of a comprehensive estate plan when using trusts in your planning. Working with an estate planning attorney with experience in trust-based planning will help to ensure that you have not only the proper trust program in place but also the necessary safeguards to ensure that you are protected in the event of unexpected circumstances.

The need to establish guardianship rarely emanates from a joyous occasion. Traditionally, a guardian for an adult is needed in cases of incapacity or diminishing capacity resulting from a disabling condition.

There are two primary ways to obtain guardianship for an adult:

1. Reactively file an Application for Appointment of Permanent Guardian with the court
2. Proactively complete guardianship planning documents

Reactive Guardianship Application

Upon discovery that an individual (potential ward) can no longer care for themselves, loved ones (applicant guardians) often find it necessary to become primary decision makers as it relates to health and financial matters. If a proactive guardianship plan is not in place, the concerned party must apply for guardianship in the county in which the potential ward resides. As you can imagine, the court takes requests for guardianship very seriously, and sets forth a detailed process that must be completed before the applicant guardian can begin acting on behalf of the ward.

The non-profit organization Texas Guardianship Association outlines the reactive guardianship process on its website. Here are a few highlights of this process:

The Application:

• Demographic information for self and potential ward, including social security numbers
• The “nature and degree” of suspected incapacity supported by medical testimony
• The type of guardianship sought
• The value of the proposed ward’s estate – including housing, revenue, benefits, insurances, etc.
• And much…much more

Court Investigation:

• The court may request that an investigation be performed by a court appointed investigator to determine validity of the application. The investigator will talk with the potential ward, doctors, psychologists, family members, social workers and others to determine if the application for guardianship is necessary.

Appointment of attorney and guardian ad litem:

• If the investigation supports the need for an appointment of a guardian, the court will appoint an attorney and guardian ad litem to advocate for the best interests of the ward.
• Court hearing to determine (among other topics):

• If the potential ward can adequately care for his or her physical and financial needs
• What is in the best interest of the potential ward
• Is guardian applicating qualified to care for the potential ward

Disposition of case including, but not limited to:

• Defining parameters of guardianship
• Bonding the appointed guardian
• Issuing letters of guardianship

This lengthy process is designed to fully protect the individual who may be experiencing a disabling condition. However, there is a way to be proactively in control of who becomes your guardian should you or a family member become incapacitated.

Proactive Guardianship Planning Documents

Working with a qualified attorney to craft guardianship documents allows you to proactively determine who will act as your guardian and in what capacity. For example, a specific family member may be a wonderful medical provider, but a horrible money manager. Defining roles and responsibilities before a time of crisis allows you and your guardians to clearly communicate and make plans to carry out your wishes in the event of incapacitation. Avoiding the arduous, yet necessary, process of applying for guardianship post-incapacity by settling the matter via working with an expert attorney to put a plan in place gives peace of mind for all involved.

Our firm skillfully navigates both reactive and proactive guardianship arrangements. Should you find yourself in need of crafting guardian planning documents or applying for guardianship, we are here to serve you. Schedule a free consultation with our attorneys to discuss your guardianship needs.

Agent– a person who is authorized to act on behalf of another

EstateAdministration– the process of settling an estate after someone dies

Executor– the person you designate in your last will and testament who will work with the attorney to settle your estate

GrantorTrust– any trust over which the settlor or other owner retains the power to control or direct the trust’s income or assets, resulting in the income of the trust being taxed to the settlor, rather than the trust

IncomeBeneficiary– a beneficiary who is to receive the income, as opposed to the principal of a trust

IndependentExecutor– your executor who is allowed to act pursuant to a simpler probate process because you either authorized it in your Will or all of your heirs agreed to allow the executor to serve as an independent executor. Independent executors typically do not require the court authorization to act that is otherwise required of executors.

LastWilland Testament – a legal document naming your executor and describing, among other things, who is entitled to your assets when you die

LivingTrust– a trust that you establish during your lifetime

LivingWill – a document whereby you express your intentions regarding the withdrawal or withholding of life support systems

Principal– one who directs or allows another to act on his behalf

PrincipalBeneficiary– a beneficiary who is to receive the principal of a trust upon the termination of the trust

Settlor– a person who creates a trust (sometimes called a grantor”)

Trust– a relationship resulting from the transfer of title to property to a person (trustee) to be administered for the benefit of another (beneficiary)

TrustIncome– any interest earned on the principal of the trust; the right to use trust principal such as a home

TrustPrincipal– the original money and/or assets placed into the trust

Trustee– the person appointed to hold and manage property in trust for the benefit of another

Before we begin discussing Medicaid, let’s take a moment to differentiate between two commonly misunderstood, government-supported healthcare programs.

• Medicaid is a federally-funded and state-administered health insurance program for individuals of limited means. State administration signifies that qualification requirements and benefits vary state-to-state.
• Medicare is a federally-funded health insurance program providing coverage for those 65 years old and older or those who are severely disabled regardless of income. Medicare’s qualifications and benefits are regulated by the federal government and do not vary state-to-state.

While there may be some overlap in the populations served by Medicaid and Medicare, there is a large variance in qualification for service as it relates to the economic status of the recipient. Now that we have outlined the basic differences between Medicaid and Medicare, let’s explore Medicaid and its impact on long-term healthcare planning.

The typical American lives to be 79 years old, and rarely has the necessary financial resources to fund nursing home care from the date of admission until he or she passes away. It is reported that the average cost of nursing home care in the state of Texas is more than $5,900 per month. As you can see, it would take a tremendous amount of money each year (more than $70,000!) to provide yourself or your loved one with nursing home care for an extended period. Let’s investigate two specific situations to further identify the best course of action when confronted with the need for medical services.

• Help! My mother/father/elderly relative needs emergency Medicaid.
• Help! I (we) need to plan for my/our financial and medical future.

Emergency Medicaid

Help! My mother/father/elderly relative needs emergency Medicaid. When facing an emergency medical need, including nursing home care and in-patient treatment, many of us do not know how to navigate the complex world of Medicaid applications. An attorney knowledgeable in Medicaid eligibility is a great source of assistance to decipher Medicaid complexities including how to proceed in cases of unanticipated nursing home care.

A few of the issues that our attorneys address in this process are as follows:

• Crafting your monthly income to fit in below the income cap, which is currently $2,250/individual.
• Structuring a plan to keep your total available resources below the resource limit which is currently $2,000.
• Addressing real estate to avoid Medicaid recovery claims after your death.
• Closely walking you through the complications of the Medicaid application process.

Planning for the Future

Help! I (we) need to plan for my/our financial and medical future. None of us like to dwell on the topic of our mortality, but it is better to proactively plan rather than reactively scramble to make decisions during a time of crisis. For example, did you know that a step in qualifying for Medicaid services involves a five-year look back into financial activities? This financial review takes into consideration both current and historic assets when determining eligibility. Being over the income cap is one of the most common causes for Medicaid denial. A timely transfer of assets sets the stage for a smooth transition when planning for future needs. But the question remains, how does one transfer assets?

Placing your assets in a special kind of trust transfers them out of your name, but can still allow you to benefit from those assets once transferred. An irrevocable trust is not for everyone and each situation is unique. Working with a qualified estate planning attorney avails you of the expertise needed to establish a long-term care plan that best meets immediate and future needs.

Key benefits of establishing a trust are:

• Asset protection from future creditors of beneficiaries
• Ability to designate who will receive the net distributable income generated in the trust
• Ability to make assets in the trust noncountable in terms of eligibility for means-based governmental benefits, such as Medicaid and Supplemental Security Income (SSI)
• Ability to specify certain terms and incentives for beneficiaries’ use of trust assets
• Ability to determine who will receive any trust assets after the deaths of the initial beneficiaries
• Ability to create special conditions for asset distribution and many more benefits

None of these benefits are automatically included in a trust. Each potential benefit requires the inclusion of specific language in the design and drafting of the trust. Thoughtful planning and careful drafting are necessary to take advantage of benefits. Partnering with a qualified estate planning attorney is an investment into your (and your heirs') future.

Our firm is here to help you explore many avenues of planning for your future. Each situation is unique, and we take the time to work with you to discover what is best for your circumstance. Estate planning is not a one-size-fits all activity. Partnering with our firm places you and your needs as a top priority when either applying for emergency Medicaid or crafting trust documents that position you to remain in control of your assets even upon needing Medicaid services.

STEP 1: FIND AN ATTORNEY

Establishing an estate plan may seem daunting, but the first step is to locate a competent attorney who can guide you through the entire process and ensure that your assets will pass to the right people with minimal delays and costs. You will get the best estate planning advice from someone who practices exclusively in the area of Estate Planning and Estate Settlement. The law changes every year. You and your family need someone who keeps up with these changes for you. Also, recommendations are often a reliable means of locating an estate planning attorney. You can look for recommendations from others to see if they describe the type of attorney that you are looking for who can complete the work that you are seeking to be done.

STEP 2: MEET WITH THE ATTORNEY

After locating an attorney, set up an appointment to have a conversation about what your estate plan should include. The attorney will likely make certain recommendations to you in order to complete your customized estate plan. Often, people find it most beneficial to work with someone who will consult with them without a fee in order to determine if the attorney and the services they provide are the best fit for them.

STEP 3: BE PREPARED TO DISCUSS YOUR PROPERTY AND FAMILY

For the initial consultation, it is beneficial to provide the attorney with a general list of your assets and their values. The attorney will be able to determine if any special planning will be necessary to reduce potential tax consequences. When you meet with the attorney, also be prepared to answer the following questions:

• If you are married, how do you want to leave assets to your spouse?
•  How do you want to leave assets to your children? Do you want to leave assets to them outright or in a special inheritance trust?
• Who do you want to handle your financial affairs for you during your lifetime in the event that you cannot do it yourself?
• Who do you want to make medical decisions for you if you are unable?

Once you answer these and other questions, your attorney should have the necessary information to draft the appropriate estate planning documents. Meet with Justin or Jacob – schedule your free consult today.